Obamacare blowback, poor earnings to lead markets lower

WASHINGTON, October 23, 2013 – A poor jobs report was judged to have improved the prospect of more economic stimulus from the Federal Reserve. That “bad news is good news” theme pushed the Standard & Poor’s 500 index to a fourth consecutive record close Tuesday.

But today’s earnings, particularly those of heavy equipment giant Caterpillar (CAT) look awful this morning and the market is likely to open poorly. Evidence that the impending Obamacare Bite continues to threaten employment and profitability also continues to build.

The U.S. economy added 148,000 jobs in September, the Labor Department reported Tuesday, lower than the 180,000 jobs forecast. The report was delayed for 2 ½ weeks because of a 16-day partial government shutdown.

Analysts are expecting the upcoming jobs report for October to be weak because the shutdown may have dampened hiring. But so has the advent of Obamacare, which has many employers either downsizing or cutting employee hours in an attempt to dodge the permanent economic blow to their companies’ bottom lines. That’s something that may not be reflected in October’s formal statistics but will likely show up in the less-publicized U-6 stats we discussed in our Prudent Man column Tuesday.

In the absence of stronger jobs growth, the economy will struggle to grow quickly and that means the Fed is unlikely to stop its stimulus effort anytime soon. Today’s market action is likely to be less happy than the recent, post-shutdown irrational exuberance. S&P 500 companies are forecast to report average earnings growth of 3.5 percent for the third quarter, according to the latest estimate from S&P Capital IQ. That would be the slowest rate of growth since the third quarter a year ago.

An hour before today’s market open at 9:30 a.m. EDT, futures for the Dow Jones Industrials (DJI), the S&P 500 and the tech-heavy Nasdaq are all down sharply indicating a strongly negative start for the day’s trading action.

Oil is down substantially for the second day in a row, with futures weighing in at roughly $96 a barrel as of this writing which could lead to a dramatic lowering of prices at the pump for the holidays if the drop accelerates or is at least sustained. This, in turn, could offset some of the current quarter’s predicted negativity, but it’s still too early to tell.

After a couple of banner days, gold and silver are off sharply this morning, indicating that the downward manipulation of precious metals pricing is still alive and well—although the dollar did rise slightly against the Euro this morning.

Heavy manipulation continues in the metals and currency markets, but the perps—possibly the central banks themselves, and certainly J. P. Morgan when it comes to nonsense in the silver pits—are either operating from stealth cockpits or their friends in the financial press are continuing to cover for them.

On other nefarious fronts, Netflix took a beating after a nice open yesterday. Carl Icahn dumped a huge chunk of his large holdings in the stock, after which he happily tweeted his triumph for all to see, cutting the stuffing further out of the stock and obviously hoping to damage the holdings of funds that still hold big positions in the stock right before they have to close their 2013 books at the end of this month.

Icahn has been having great fun illegally manipulating the markets in plain sight with his Tweets recently and we wonder when the government is going to talk to him about this. We’ll have to check to see if he’s another one of the majority of fat cats who give the bulk of their campaign donations to Democrats who then label the Republicans the Party of the Rich. In which case his self-serving tweets are likely to continue.

—AP contributed to this report.

Today’s trading tips

Markets were approaching or slightly exceeding short-term overbought status after yesterday’s close, so a short breather—or, somewhat less likely, a brutal short-term downdraft—may be in order for at least two or three trading sessions.

Best to stay on the sidelines today unless you have some kind of short position you think might be good for a trade. That said, unless you constantly monitor the action on your own computer, any trade on the short side is likely to be over in the metaphorical blinking of an eye, so unless you can hawkeye such a trade, it’s likely best not to do it.

Gold and silver remain treacherous. We put on a tiny position in silver bullion ETF SIVR Tuesday just because. Ditto for gold bullion ETF SGOL. We might regret this, but the positions are too tiny to matter. One of these days, likely fairly soon, the perpetual short machines will reverse the game and we’d at least like to have a foot in the door when it happens.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently holds small positions in SGOL and SIVR, numerous ETFs, plus select bonds primarily purchased at the height of the 2008-2009 debacle.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN).
A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17